If the three and four letter agencies can actually bail out all of the bond holders, given the existing diameter of the Euro faucet. There is likely to be cascading failures, with most of the worst on a single day, certainly within a single week. Of course, Bernanke will offer unlimited dollar swaps. That is what he is there for.

They can, of course, bail out anybody important (NB: "Important" means "important to Angela Merkel," not "important to the national interest"). That was always within their capacity, and this whole theatre with the three- and four-letter agencies has been about concealing the bailout from the internal surplus countries' taxpayers and fraudulently cooking up a crisis to impose even tighter adherence to the Grief and Stupidity Pact.

But Merkel won't let them open the faucet wide enough to bail out Italy, Spain, Belgium and France, especially if the crises occur simultaneously. They could do it but for the rules they have set in place. Of course Germany has, in the past, had no trouble bending the rules when it is in its interest to do so.